 Please find a laptop in the back › If you are having trouble logging in, please raise your hand  Please go to ‘moodle.ltsd.k12.pa.us’ to get to Moodle › Log into Moodle and open up Thursday’s Bell Ringer (1/24)  Edit your answer and place 1 of the 6 categories we discussed last week next to each of your 10 costs  Look in your notes if you need to remember those 6 categories

 Ways to classify costs: › By Categories Cost of sales : Product inventory, raw materials, manufacturing equipment, shipping, packaging, shipping insurance, warehousing

Professional fees : Setting up a legal structure for your business (e.g. LLC, corporation), trademarks, copyrights, patents, drafting partnership and non-disclosure agreements, attorney fees for ongoing consultation, retaining an accountant

Technology costs: Computer hardware, computer software, printers, cell phones, PDAs, website development and maintenance, high- speed internet access, servers, security measures, IT consulting

Administrative costs: Various types of business insurance, office supplies, licenses and permits, express shipping and postage, product packaging, parking, rent, utilities, phones, copier, fax machine, desks, chairs, filing cabinets – anything else you need to have on a daily basis to operate a business

Sales and marketing costs: Printing of stationery, marketing materials, advertising, public relations, event or trade show attendance or sponsorship, trade association or chamber of commerce membership fees, travel and entertainment for client meetings, mailing or lead lists

Wages and benefits : Employee salaries, payroll taxes, benefits, workers compensation

 Other ways to classify costs: › Fixed vs. Variable › One-time Fee vs. Ongoing Cost  Seed Money

 Revenue- Amount of money that a business earns from selling their product or service.  Costs - Something spent or required to be spent.

 Profit - The amount a business makes when total revenue exceeds total expenses. Revenue > Costs  Loss - The amount a business loses when the total revenue is less than the total expenses. Costs > Revenue  Debt - Money that is owed. Can accumulate when costs are higher than revenue for a business.

 If you want a profit, you have to plan!  That is why a business plan includes a financial analysis

Please get in the following groups: Group 1: Sara, Bryce, Ashley, Emily Group 2: Tala, Emma, Kyle Group 3: Austin, Rocco, Samantha

 The entrepreneur borrows money from a person or an institution › They sign a promissory note, which commits them to making regular payments, which includes interest

 Secured Loans › Loans that are backed up by personal property › If you cannot repay your loan, you give up your personal property  Examples: › Line of Credit › Long-term Loan

 Unsecured Loans › Loans that are not backed up by personal property › Loans that are made to a banks most creditworthy customers  Examples: › Short-term loans that have to be repaid within a year

1. Lender has no say in the decisions of the business 2. You don’t give up ownership 3. You keep all the profits 4. Payments are always the same

1. You have a monthly payment, that includes interest 2. If loan payments are not made, the lender can force the business into bankruptcy -Close the business and sell assets (if you are not incorporated, you have to sell personal assets)

 The entrepreneur trades a percentage of ownership for money › The investor will receive a percentage of future profits

 Friends and family contributions  Venture Capitalists  Sale of stock

1. A venture capitalist cannot force you into bankruptcy if you can’t pay 2. You only pay them if your business makes money

1. You have to give up some ownership of your company -You have to give them some of your profit 2. They have a say in how your business is run 3. You may end up paying them much more than they gave you -Anita Roddick Story

 “Pulling yourself up by the bootstraps” › Goal is to keep start-ups costs low and finance with your profits as you go  Suggestions › Hire as few employees as possible › Borrow or rent equipment instead of buy › Use personal savings › Arrange small loans from friends or relatives

 Advantages › You don’t go into major debt › You don’t give away any of your company  Disadvantages › You have to start very small and inexpensive › It may take a while to save up enough

 Please log into Moodle and complete today’s Exit Slip

1. The business is a startup 2. Lack of a solid business plan 3. Lack of adequate experience 4. Lack of confidence in the borrower 5. Inadequate personal investment in the business

 Show’s the business’s revenues and expenses over a period in time › Shows if you received a profit or a loss › Sometimes called the Profit/Loss Statement

 This statement can help you do the following: 1. Examine how sales, expenses, and income are changing over time 2. Forecast how well your business can expect to perform in the future 3. Analyze your costs to determine where you may need to cut back (or where you can increase spending)

 Look at the example on the back of your Bell Ringer 1. Revenue – money made from the sale of goods or services 2. Cost of Goods Sold – Cost of the inventory or the materials to make the item 3. Gross Profit = Revenue – Cost of Goods sold 4. Operating Expenses – costs necessary to run a business (fixed costs such as rent, utilities, advertising, etc)

5. Net income before taxes – the amount remaining after COGS and operating expenses are subtracted from revenue 6. Taxes –the amount of taxes you have to pay 7. Net income/Loss after taxes – After taxes are subtracted, the Net Income (Profit) or Loss for the period